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Tuesday, February 11, 2014

Govt clarifies FII, NRI investment policy in insurance sector

The Congress led UPA government has cleared that the
26% cap on foreign investment in the insurance sector will also be applicable
to intermediaries such as brokers, third party administrators and surveyors.
As per a press note, released by the Department of Industrial Policy and
Promotion on Wednesday, in case of insurance companies, the 26 % cap will include
foreign direct investment (FDI), foreign institutional investments (FIIs) and
investments from non-resident Indians (NRIs) as well.

The earlier policy allowed up to 26% FDI in the insurance sector through the
automatic route without clarifying if this included other foreign investments
such as FII and NRI as well.

India's insurance regulator has set up a committee to study the option of
allowing 100 percent FDI in insurance intermediaries, third-party
administrators, surveyors and loss assessors. But action on this, too, would
have to wait.

The Insurance Regulatory and Development Authority (IRDA), has formed a
committee to look into a possibility to allow 100% FDI in insurance
intermediaries such as brokers, third-party administrators (TPAs), surveyors
and loss assessors.

The Insurance (Amendment) Bill, which proposes to raise FDI in the sector to 49
%, has already been approved by the Union Cabinet. But, it's been pending in
the Rajya Sabha since December 2008, as the Standing Committee on Finance,
headed by senior BJP leader Yashwant Sinha, didn't support it. The Committee,
in its report, had argued that raising the FDI ceiling to 49% would expose the
sector to global vulnerability.